Insurers are trying to unload the properties because, ``It doesn't look good on their books,'' says Sue Ann Bailey, a Weiss spokeswoman.

If a property was valued at $1.2 million in the late 1980s, it may be worth only $800,000 now, Ms. Bailey says. ``Even though they're going to lose a little, they'd rather be able to get rid of a bad loan,'' she adds.

Prior to the 1990-1991 recession, Prudential Insurance Company of America sold all foreclosed real estate as soon as it owned the property. That was usually $150 million to $250 million a year. But this year, Prudential hopes to sell $800 million of foreclosed property that has built up, says spokesman Rick Matthews. Prudential's real estate holdings are $28.5 billion.

``Problem'' properties includes foreclosed, restructured, and delinquent mortgages (more than 60 days overdue). In 1992, some regions of the country saw nonperformance on outstanding real estate loans nearing 25 percent, according to data jointly compiled by the American Council of Life Insurers (ACLI) and A. M. Best Company.

For companies with insufficient capital, repossessed real estate threatens future solvency. ``After two years of economic recovery, the insurance companies should have reduced their bad real estate by now,'' Weiss notes.

Having been burned in their real estate investments, many life insurance companies have lowered the proportion of their total portfolios invested in property.

Since the fourth quarter of 1990, life insurers' real estate holdings have fallen from $283 billion to $275 billion in the first quarter of 1993, Weiss says. Total assets grew by $338 billion from $1.3 trillion to $1.7 trillion. This indicates a drop from 21 percent of total assets to 16 percent.

A relatively small company, Anchor National Life Insurance Company, reduced its total real estate holdings from $159 million in 1991 to $121 million in the first quarter of 1993. Real estate holdings of Provident National Assurance Company fell from $71.8 million to $5.3 million during the same time period.

One reason real estate is being unloaded is new rules devised by the National Association of Insurance Commissioners on capital requirements. These take account of the risk of various investments.

The risk-based capital requirements are set up to assess the strength of life insurance companies' portfolios. After junk bonds, mortgages are considered the riskiest type of investment. Too much risk in a company's portfolio could result in a bad rating from state regulators.

Despite the buildup of repossessed property, some companies are finding that now is a good time to pare down property investments. Anticipating that the real estate market may not return to where it was five or six years ago, life insurance companies have been encouraged to step up their sales efforts compared with 1991 and 1992, ACLI spokesman Gene Grabowski says.

``In the last few years, there's been virtually no liquidity in the market,'' Mr. Matthews of Prudential says. But now, ``we see a large appeal [to] the market for appropriately priced real estate.''

Typically, assets owned by insurance companies are stocks, bonds, and real estate investments, including commercial mortgage loans and real property. Insurers' financial weakness is determined partly on the amount of problem mortgages as a percentage of the company's assets. Today, more money is being invested in lower-risk investments, such as government and blue chip bonds, Bailey says.